Details. The first question is, "Who is to be included?'' In a few cases all employees, but in most instances only certain qualified persons are admitted. A period of one to five years' service may be called for; only those over 21 years of age may be included, or only the clerical and technical staff. Wunderlich, Ltd. (Australia) excluded all wage-earners from its co-partnership scheme established in 1914, because "" experience has shown that in this country at least the largest conceivable contributions among wage-earners would be of comparatively insignificant consequence to the effect of wages boards' decisions. It is against the law to ask wage-earners. to contract themselves outside the general conditions of the trade; and in spite of the greatest benefits it were possible to offer they would still be under the control of their respective trade unions, and compelled to participate in strikes if called upon. The scheme was, therefore, to apply only to those "who have stepped out of the ranks into a superior position,'' and. who in the opinion of the directors had "shown marked ability and originality in forwarding the interests of the firm.'' Limitations such as these exclude casual workers, and profit-sharing schemes usually touch only those who can look upon their job as more or less permanent. Hence in the various British schemes at work in 1912 only about 57 per cent. of the employees in the firms concerned participated in the profits.

What do they get? Two things—a wage and a share of the net profit. The wage is generally the union rate for industries in which there is a union. The leading advocates of profit-sharing declare that their proposal "assumes a standard wage before there can be any talk of profits to divide. A standard wage assumes organization to maintain it and to raise it; it assumes reasonable forms of trade unionism, collective bargaining, the meeting of capital and labour on equal terms, with conciliation machinery to fall back upon when outstanding differences remain."' Secondly, labour gets a share of the net profit. Out of the gross income the various costs of production have to be met-wages, salaries, raw materials, depreciation, additions to reserve, rent, rates, taxes, and a fixed rate of interest to capital. What is left is net profit, and a certain fixed percentage is set aside for distribution among the wage-earners in proportion to their annual earnings. The percentage varies widely in different firms, but in most recent schemes half goes to capital, half to labour. For instance, in 1918 a Melbourne firm of merchants (Paterson, Laing, and Bruce) adopted the following plan: A fair wage to the employees, a fair wage (6 per cent.) to capital. "After the staff and capital have received what might be described as a minimum wage," and provision has been made for debenture interest, reserves, pension funds, etc., what is left is divided equally between capital and staff. The International Harvester trust (U.S.A.) in 1920 went one better. Capital gets 7 per cent., and of the net profit 60 per cent. goes to labour, 40 per cent. to capital. In 1912 participation schemes in England gave on an average a sum equal to 5 per cent. of a man's wage. Profitsharing meant an extra 1/- in the £1.

How is the share paid? In many cases payment is made in cash at the end of the year. This has been the practice in about three-fifths of the British schemes, and is ordinary profit-sharing in its most simple form. In other cases, part of the share is paid in cash but the remainder is put into a thrift or provident fund connected with the works, from which sickness, old-age, or death payments are made, or from which women receive a dowry when they leave to be married.

Co-partnership. In an increasing number of companies the worker receives his portion of the profits in the form of shares in the company. The money may be incorporated in the capital of the firm as new capital, or used to buy shares on the market. Under such a policy, which has grown in popularity since 1890, the employees of the South Metropolitan Gas Co. own £500,000 of shares in that company, those of Lord Leverhulme over £750,000, whilst those of the Australian tobacco trust received 165,000 £1 shares between 1914 and 1920. The International Harvester's plan sets aside $60,000,000 of stock to be gradually passed over to its 40,000 employees. The worker's share of the profits is to be paid him partly in cash and partly in 7 per cent. preferred stock. In one Yorkshire textile firm, where co-partnership was adopted in 1892, the wage-earners in 1916 owned more than half the capital of the company, and in their dual capacity as shareholders and profit-sharers drew over two-thirds of the company's profits. But such a position is very rare; in 38 British gas companies practising co-partnership in 1915, only £840,000 of capital was held by employees out of a total of over £55,000,000.

These shares, though now representing large blocks of capital, are nearly all subject to some disability under which ordinary shares do not labour. They are often officially described as a "free gift," but the freedom is hedged round by limitations. For instance, they are seldom transferable, except to the worker's wife and children. They cannot usually be sold, though in a few cases sale is permitted after a share has been held, say, for five years. Further, the scrip is generally kept in the hands of the employer or of a committee of trustees, who may have power to cancel it in certain circumstances-e.g., if the owner is convicted of insubordination, loafing, etc., or leaves the firm without the employer's consent. The share is a tie to prevent men from leaving in search of better positions. It frequently carries a lower rate of profit than do ordinary shares, though in the Australian tobacco and an increasing number of schemes the labour share draws the same rate as other stock. It does not as a rule entitle the holder to receive gifts of new stock when recapitalization takes place. But the greatest disability lies in the fact that in most instances the shares do not entitle the owner to a vote at shareholders' meetings. Here we have the real test of a co-partnership scheme. If labour is to be a partner, is its position to be that of a sleeping or junior partner, or is it to be admitted on terms of full equality? If the former, then the scheme masquerades under a false name, for the essence of partnership is sharing of rights and responsibilities. In fact, real co-partnership should give to labour a share in control because it is labour, not because of any shares it may secure under a co-partner scheme. This is admitted to some extent in some places. Of the ten directors of the South Metropolitan Gas Co. three must be elected by the employees, and a similar rule prevails in a few other firms. Elsewhere control remains entirely or predominantly in the hands of capital.

Extent of Movement. Between 1829 and 1919 380 profit-sharing or co-partnership schemes were established in British industries, most of them in years of industrial unrest. Of them only 182 were alive in 1919, and some of these had not yet emerged from their infancy. Only 36 dated back before 1901. The average duration of the schemes had been 14 years, though a great number succumbed before reaching their fifth birthday. In other countries there are instances of long-lived ventures, especially that of the Leclaire firm, which dates back to 1842. A British official return (1919)

shows the diseases to which schemes succumbed. Of 198 abandoned projects, 91 fell because of the apathy of the employees and the dissatisfaction of the employers at the results achieved. Success has depended on the nature of the industry, the motive behind the scheme, and the details of the plan adopted. Profit-sharing has been successful in private gas companies; but this industry enjoys a local monopoly, can always find use for new capital, has its dividends limited by law, employs its workers in a twelve months' contract, and is comparatively free from trade-union influences. Given good work and decent management a regular profit is assured, and so circumstances favour profit-sharing. Or a firm like Lever Bros., with its monopoly over the soap market, and its use of large masses of unorganized female labour, has little fear either of competition or of trade-union demands. A trust or monopoly can not merely get an assured profit, but can make it so large as to have a bit to spare for its employees.

Comments. It may be at once conceded that profit-sharing may materially improve the condition of some workers. But that benefit is not at the expense of the employer. The offer of a share in profits is generally made in the hope that the worker will be induced thereby to intensify his exertions, increase his productivity, and so enlarge the net profit of the firm. His share comes out of this additional sum; he may get half of it, but the remainder goes as extra profit to capital.

Secondly, nearly all schemes are despotic in inception and control. They have always been initiated by the employer, and the details are worked out by him. The labour partner has very little control over them. The despotism may be benevolent, but it is no less a despotism. All comes from above downward; the employer has the whip hand, and everything depends on his attitude. If he is a man of kindly personality and great ability, all may go well. But since the amount of the profit depends upon other things than hard work on the part of the employee, all may go ill. For instance, the net profit depends upon the ability of the management, the careful organization of the factory, successful purchase of raw materials, and skilful sale of the product, all of which count as factors in deciding whether there is to be a profit or a loss. But even assuming that the management is excellent, we are not yet out of the wood. For the employer alone decides what salaries shall be paid to managers and directors, how much shall go to reserves and depreciation, how much shall be taken for extensions, and what shall be the fair rate to capital. Finally, he determines the "principle of equity'' on which the net profit shall be shared between capital and labour. All these things vitally affect the amount which is to be available for distribution, and the portion which is to go to labour; and yet labour has no voice in the decision of any one detail. That is queer partnership. Beyond this is the fatal objection that the whole scheme can be abandoned just as readily as it was commenced. The Australian tobacco trust, for instance, does not bind itself in any way to continue its yearly distribution of shares; this is quite optional on its part, and depends upon the general prosperity of the company and upon the employees recognizing and heartily responding to the generous efforts made by the directors on their behalf. The whole arrangement generally hangs by a slender thread, which may be snapped by a trade depression, by the anger of the employer at some workmen's outburst of discontent, or by a change of owner or manager. Co-partnership is autocratic, and autocracies are as unstable in industry as in politics.

Thirdly, co-partnership, as at present practised, cuts across the line of trade unionism. Theoretical co-partners declare that there is no antagonism between the two, but their picture is too rosy. For in its essence co-partnership strives to tie the workman up to the firm; trade unionism strives to make him a member of a solid working class. Co-partnership rests on a community of interests between one employer and his work-people; unionism on a community of interests of all wage-earners in a whole industry, or eveu in all industries. In a profit-sharing scheme the workman may get substantial benefits, but they are confined to that one firm. He has done nothing to raise the level of his whole class or craft as a trade union might do. The worker is called upon to make a decision; to which shall he be loyal to his class or his employer? If the latter, he and his firm may help to break a strike, and so cause a decline in wages or prevent an increase; and since he is to be paid the trade union rate of wages, his own wages are kept down or pushed down. He may help to kill unionism, and when that is done he has to trust his fortunes to the mercies of an autocratic profitsharing scheme. The wage-earner realizes this. He knows that his union is the only real permanent safeguard. At whatever cost he must stick to it, and if co-partnership and unionism cannot live side by side, all the worse for co-partnership. No wonder, therefore, if the trade union movement is almost solidly opposed to co-partnership. The stalwart class-conscious unionist will have little to do with what he calls "profit-snaring.”

Conclusion. Profit-sharing and co-partnership, therefore, have made very little impression on the economic system as a whole. They are ripples on the surface of the water, caused usually by the occasional squalls of labour unrest. Had they been embodied in the industrial system fifty or seventy years ago, before the rise of unionism and socialism, and before class-consciousness had developed, they might have achieved much success. To-day their success is limited to firms where unionism is weak, or where the employer commands the affection and respect of his work-people. But the idea has little apparent hope of permeating industry generally; there is too much mutual suspicion to live down. It might be successful under three conditions. (1) If the partnership were admitted to be real and labour given its share of control. This would mean, among other things, the admission of labour to the work of devising and administering the scheme, and the election of workmen's representatives to the board of directors. (2) If the employers collectively worked openly in conjunction with the unions. One-firm schemes may have little hope; but since employers are organized in federations, and men in unions which may soon become industrial rather than craft unions, it might be possible for these two bodies to confer and formulate a plan for the whole industry. (3) If the shares given were of full status, and made it possible eventually for the labour partners to hold at least half the share capital.

Books Recommended. Fay, C. R., "Co-partnership in Industry''; Williams, A., "Co-partnership and Profit-Sharing''; Williams, F. G., "Industrial Peace''; Proud, D., "Welfare Work"; Webb, S., "The Works Manager To-day"; Withers, H., "Case for Capitalism"; "Welfare Work" (Federal Bureau of Science and Industry, Bulletin 15); "Industrial Cooperation in Australia" (Bulletin 17).

CHAPTER XXVI.

CO-OPERATION OF CONSUMERS.

LIKE socialism and syndicalism, co-operation seeks to make drastic changes in the structure of society. It has an ultimate ideal of a world in which competition, exploitation and profit-hunting will be replaced by mutual aid and production for use. But in almost every other respect it differs from the other two movements. It looks to no social upheaval or catastrophic change; it wastes little time fulminating at the evils of capitalism; it depends on shrewd common sense and business ability rather than on erudite scholarship and brilliant oratory. It has always found work ready at hand, and possesses a permanent motive force in the material self-interest which over-leaps all religious, political, and economic differences. Its achievements are to be found in the tens of thousands of co-operative societies scattered over the face of the globe, societies which have taken to themselves vast fields once exploited for profit.

Basis of Co-operation. As its name suggests, co-operation is the voluntary united effort of men to further some interest which they have in common. It is an expression of the desire for liberty, especially liberty from exploitation of any kind. That liberty has two aspects: it concerns men as producers and also as consumers. As a producer, the man with little or no capital cannot attain economic independence. He is forced to sell his labour to the big man, who uses it, along with that of a hundred others, to help in making profit. The wage-earner has no control over his labour, no control over the surplus. He is bound, and poor. Now if these hundred individual workers combine, pool their savings (and possibly borrow money from elsewhere), they can establish a factory. It will be their property; they will manage it, and receive whatever profit is made.

Similarly in agriculture, the small man, even if he owns the land on which he works, may be dependent on some other person. He has little capital of his own, he cannot afford necessary equipment; he cannot buy or sell in bulk. Hence he is in the hands of the money-lender, manufacturer, merchant, and broker, who may exploit him severely in lending him money, selling him seeds, implements, and manures, grinding his corn, curing his bacon, making his butter, or selling his produce in the market. But if he and fifty of his neighbours, similarly situated, combine, they can dispense with the middleman or bring him to reason; they can establish their own bank, buy in bulk, manufacture in bulk, sell in bulk, through factories and agencies which they now control.

Co-operation of producers has therefore been instituted, both in industry and agriculture. Freedom from the capitalist, financier, and middleman have been the motives driving wage-earners and small farmers towards co-operation; but while the wage-earners have generally been unsuccessful, agricultural co-operation has made very great progress.

The second form of co-operation is that of consumers. The individual consumer requires a great variety of commodities. These are provided by some capitalist, who as producer, manufacturer, or distributor brings the